PayPal faces lawsuit for freezing customer accounts and funds

Three PayPal users whose accounts were allegedly frozen and whose funds were withdrawn from the company without explanation have filed a federal lawsuit against the online payment service. The plaintiffs — two users from California and one from Chicago — allege that the company unlawfully confiscated their personal property and violated extortion laws. They are now proposing a class action lawsuit on behalf of all other users whose accounts were previously suspended, demanding a refund, punitive damages and exemplary damages.

Lena Evans, one of the plaintiffs, who had been a PayPal user for 22 years, said the site seized $26,984 from her account six months after it was frozen without ever telling her why. Evans had used PayPal to buy and sell clothes on eBay to exchange money for a poker league she owns and for a non-profit organization that helps women with various needs.

Co-plaintiff Roni Shemtov said PayPal seized over $42,000 of her money and was never given an acceptable reason to terminate her account. When she contacted the company, she received several different explanations: one customer rep said it was because she was using the same IP and computer as other Paypal users, while another said it was because she was selling yoga wear 20 to 20 years old 30 percent lower than what I sold at retail. Another representative allegedly said it was because she used multiple accounts, which she denies.

Shbadan Akylbekov, the third plaintiff, said PayPal seized over $172,000 of his money without explaining why the account was restricted in the first place. Akylbekov used the account of a company his wife owns to sell Hyaluronic Pens, which are needle-free pens that inject hyaluronic acid into the skin. After the money disappeared from the account after a six-month hold, PayPal allegedly sent his wife a letter stating that she had “violated PayPal’s User Agreement and Acceptable Use Policy (AUP) by accepting payments for the sale.” of injectable fillers that are not FDA approved.” It also said the money was debited from her account “for the penalty resulting from these AUP violations under the User Agreement.”

PayPal has long angered many users for limiting accounts and freezing their funds for six months or more. A high-profile case was that of American poker player Chris Moneymaker, who had $12,000 withdrawn from his account after a six-month ban. Moneymaker was already asking people to join him in a class action lawsuit before his funds were “mysteriously” returned.

Part of the complaint reads:

“Plaintiffs bring this class action against defendant PAYPAL, INC. (“PayPal”) to seek damages and other remedies available at law and in equity on their own behalf, as well as on behalf of the members of the Settlement Class defined herein… This action arises out of the Defendants’ widespread business practice, monies unilaterally seize from their customers’ financial accounts for no reason and without due or fair process.

PayPal is holding the plaintiffs’ own funds in their own PayPal accounts. PayPal has failed to notify plaintiffs and class members of the reasons for the actions PayPal is taking, and has even told plaintiffs and class members that they “must obtain a subpoena” to obtain the simple information about it why PayPal stopped and denied the plaintiffs access to their own money.”

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